Opposition politicians are increasing calls for a criminal investigation into the proxy donor row as the Labour party launches its own internal investigation.
The Liberal Democrats are leading calls for a police inquiry, arguing "at first sight" it appears senior figures in the Labour party have broken the law by accepting laundered funds from millionaire David Abrahams.
Acting leader Vince Cable said it was "essential" to establish the facts and for anyone that has broken the law to face the consequences of their actions.
Mr Cable continued: "We therefore believe that the police should investigate this matter fully and the crown prosecution service (CPS) should make an assessment as to whether charges should be brought against those individuals who are implicated in what looks like criminal behaviour."
As is becoming standard practice for the prime minister, Gordon Brown has launched his own review into how funds from Mr Abrahams were donated through intermediaries.
Lord Whitty, former general secretary of the Labour party, has begun an internal investigation which will establish the facts surrounding the £600,000 donated by Mr Abrahams.
He said today: "I intend the report to be thorough and undertaken as swiftly as possible and will look at all the circumstances surrounding third party donations and the party's processes and oversight relating to donations."
Meanwhile, Harriet Harman's position remains vulnerable, despite appearing alongside Mr Brown during prime minister's question time yesterday.
Mr Brown has been reluctant to explicitly back his deputy, instead expressing confidence in her version of events and saying there is not "one iota" of evidence she knew the source of the money before Saturday.
Ms Harman stands alone as the only Cabinet minister to have accepted funds from a conduit of Mr Abrahams, having accepted £5,000 to clear her debts from her deputy leadership campaign.
Mr Brown and Hilary Benn turned down cheques from Mr Abrahams' intermediaries, casting doubt on the claim only Peter Watt, the newly departed general secretary of the party, and chief fundraiser Jon Mendelsohn knew the property developer was donating to the party through proxies.
Party treasurer Jack Dromey, who is also Ms Harman's husband, has spoken of "complete concealment" and said the concealment of funds was completely wrong.
The Conservatives have continued to attack the Labour party, after David Cameron yesterday said Gordon Brown was unfit to govern.
Tory MP Chris Grayling has queried Labour's version of events, saying it "beggars belief" the chief fundraiser would not have been aware of the law after the troubles all political parties have faced over funding.
Mr Grayling said: "The fact is that we were told by the Labour party two days ago that only one person was involved and only he knew about the donations.
"We know now this is not true. We need proper answers and we need them now."